Apple may launch cheaper iPhone model this year, analyst says

Apple may introduce a model of its iPhone this year that is 50 percent cheaper than the handsets that went on sale in the U.S. last month, JPMorgan Chase & Co. analyst Kevin Chang said.

The new model, based on Apple's thin iPod Nano, may cost less than $300, Chang said today by telephone from Taipei, citing a patent Apple filed in the U.S. and components suppliers he declined to identify. Apple began sales of two iPhone models priced at $499 and $599 on June 29.

A lower-priced iPhone may win customers away from rivals Nokia and Motorola, with Chang estimating Apple may ship as many as 40 million units of the new handset in the fiscal year ending September 2008. Apple will probably sell the new phone with several wireless carriers, unlike the five-year exclusive agreement it has with AT&T for the current iPhone, Chang said.

"We'll see this new iPhone having a noticeable impact on the handset market," Chang said. The new model may be introduced as early as the fourth quarter, he said.

Jill Tan, a Hong Kong-based spokeswoman for Apple, declined to comment on the report.

JPMorgan analyst Bill Shope in New York, who covers Apple, cautioned investors about Chang's predictions.

"The potential for a low-end, subsidized phone from Apple seems unlikely in the near term," Shope wrote in a separate report today. "Perhaps Apple will choose to eventually replace its iPod family with phones over time, but it could be premature to assume this will happen in volume any time soon."

Apple may release the next version of the iPhone in the first half of next year, Shope said. It will still be "high- priced" and support so-called third-generation networks for connecting to the Internet at faster speeds.

The new iPhone model won't have a touch screen like the current handset and will likely be controlled by a scroll wheel similar to those used on Apple's iPod music and video players, Chang wrote in the report published Monday. It will also have fewer functions, such as limited Internet browsing, he wrote.

Simpler features would allow Apple to sell the handset with multiple carriers, as operators won't need to customize their wireless networks for the phone's services, Chang said. Subsidies provided by carriers may further lower the price of the new model to as little as $99, he said.

Apple ran out of iPhones at more than half its 164 stores less than a week after introducing the handset, and AT&T said it sold out at its 1,800 outlets within 24 hours. Apple said it is delivering iPhones to its stores and AT&T shops every day.

Information from Bloomberg News reporter Connie Guglielmo is included in this report.